Treasury bill rates likely to drop

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RATES OF THE Treasury bills (T-bills) on offer today will likely decline slightly following the central bank’s decision to cut policy rates and hints on another reduction by midyear.

The Bureau of the Treasury (BTr) will auction off P20 billion via T-bills, broken down into P6 billion in 91- and 182-day papers and P8 billion in 364-day instruments.

A bond trader said the papers may fetch slightly lower rates after the Bangko Sentral ng Pilipinas’ (BSP) Monetary Board slashed the rates last week by 25 basis points (bps).

At the Feb. 3 auction, the Treasury made a full award of the P20 billion worth of T-bills it auctioned off as rates mostly declined on strong demand.

It raised P6 billion via the 91-day T-bills as planned at an average rate of 3.187%, 11 bps lower than the 3.297% quoted in the auction on Jan. 27.

The BTr also awarded another P6 billion worth of 182-day papers as programmed at an average rate of 3.964%, up by just 0.1 bp from the 3.963% quoted last week.

For the 364-day securities, it raised P8 billion as planned out of P12.522 billion in bids. The one-year securities were quoted at an average rate of 3.964%, up by 0.1 bp from the 3.963% quoted the prior week.

Yields on the 91-, 182- and 364-day T-bills closed at 3.249%, 3.469% and 3.929% at the secondary market on Friday, based on the PHP Bloomberg Valuation Service Reference Rates.

“Yields of T-bills for auction this week could trend 5-10 bps lower from previous auction following the cut in policy rates on Thursday, coupled with dovish remarks from [BSP] Governor [Benjamin E.] Diokno that another rate cut is still possible by mid-2020,” the trader said via mobile phone message over the weekend.

Following the cut, the reverse repurchase rate now stands at 3.75% while the rate of the overnight lending and deposit facilities are now down to 4.25% and 3.25%, respectively.

In an interview with Bloomberg TV on Friday, Mr. Diokno hinted on another 25-bp rate cut by the middle of the year but said the BSP will remain data dependent.

For UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion, the auction is expected to be met with stronger demand as investors may flock to safer assets like the T-bills.

“With a lot of uncertainties about the impact of the 2019-nCoV, (novel coronavirus) the demand for the T-bills may be stronger than usual. These are safer assets during these times,” Mr. Asuncion said in a phone message.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via Treasury bonds.

The government plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — Beatrice M. Laforga